MIRA INFORM REPORT

Report Date :

07.01.2012

IDENTIFICATION DETAILS

Name :	FAIRWOOD FAST FOOD LTD.
Registered Office :	2/F., TRP Commercial Centre, 18 Tanner Road, North Point
Country :	Hong Kong
Year of Establishment :	1972
Com. Reg. No.:	07036638
Legal Form :	Private Limited Company
Line of Business :	Operator of a chain of fast food restaurants
No. of Employees :	Approx. 4,600

RATING & COMMENTS

MIRA’s Rating :

Ba

RATING		STATUS	PROPOSED CREDIT LINE
41-55	Ba	Overall operation is considered normal. Capable to meet normal commitments.	Satisfactory

Status :	Good
Payment Behaviour :	No Complaints
Litigation :	Exists

NOTES :

Any query related to this report can be made on e-mail: infodept@mirainform.com while quoting report number, name and date.

ECGC Country Risk Classification List – September 30, 2011

Country Name	Previous Rating (30.06.2011)	Current Rating (30.09.2011)
Hong Kong	A2	A2

Risk Category	ECGC Classification
Insignificant	A1
Low	A2
Moderate	B1
High	B2
Very High	C1
Restricted	C2
Off-credit	D

Company name and address

FAIRWOOD FAST FOOD LTD.

(Business names:

BOILING TEA

BUDDIES CAFÉ

CAFÉ PORTO

CAT STREET CAFÉ

CURRY FACTORY

FAIRWOOD

FAIRWOOD FAST FOOD

KENTING TEA HOUSE

THE LEAF RESTAURANT)

Address:

2/F., TRP Commercial Centre,

18 Tanner Road, North Point, Hong Kong.

PHONE: 2856 7111

FAX: 2856 1966

MANAGEMENT

Group Executive Chairman: Mr. Lo Hoi Yeung, Dennis

SUMMARY

Establishment: 1972.

Incorporated on: 9th January, 1981.

Organization: Private Limited Company.

Capital: Nominal: HK$10,000,000.00

Issued: HK$5,794,470.00

Business Category: Operator of a chain of fast food restaurants.

Group Turnover: HK$1,665,881,000 (Year ended 31-03-2011)

Group Employees: Approx. 4,600. (As at 30-09-2011)

Main Dealing Banker: Standard Chartered Bank (Hong Kong) Ltd., Hong Kong.

Banking Relation: Good.

ADDRESS

Registered Head Office:-

2/F., TRP Commercial Centre, 18 Tanner Road, North Point, Hong Kong.

Fast Food Restaurants:-

Boiling Tea

Buddies Café

Café Porto

Cat Street Café

Curry Factory

Fairwood

Fairwood Fast Food

Kenting Tea House

The Leaf Restaurant

Holding Company:-

Fairwood Consolidated Investments Ltd., British Virgin Islands.

Ultimate Holding Company:-

Fairwood Holdings Ltd., Bermuda/Hong Kong.

Sister & Associated Companies:-

Fairwood Group of Companies

Benley Development Ltd., Hong Kong.

Cision Development Ltd., Hong Kong.

Fairwood (Guangzhou) Development Ltd., Hong Kong.

Fairwood (Shenzhen) Development Ltd., Hong Kong.

Fairwood B.V.I. Ltd., British Virgin Islands.

Fairwood Development Ltd., Hong Kong.

Fairwood Fast Food (Management) Ltd., Hong Kong.

Fairwood Investments Ltd., Hong Kong.

Fairwood Properties Ltd., Hong Kong.

Fairwood Trademark B.V.I. Ltd., British Virgin Islands.

Finemax Development Ltd., Hong Kong.

Great Choice Development Ltd., Hong Kong.

Joybo Development Ltd., Hong Kong.

Leon Development Ltd., Hong Kong.

Maxlane Development Ltd., Hong Kong.

Professional Institutional Catering Ltd., Hong Kong.

Profit Hero Development Ltd., Hong Kong.

Santic Development Ltd., Hong Kong.

Shenzhen Fairwood Fast Food Ltd., China.

Smarteam Development Ltd., Hong Kong.

Suncity Development Ltd., Hong Kong.

Tacco Development Ltd., Hong Kong.

Time Best Development Ltd., Hong Kong.

Union Hero Development Ltd., Hong Kong.

Wallam Development Ltd., Hong Kong.

etc.

BUSINESS REGISTRATION NUMBER

07036638

COMPANY FILE NUMBER

0091765

MANAGEMENT

Group Executive Chairman: Mr. Lo Hoi Yeung, Dennis

Group Chief Executive Officer: Mr. Chan Chee Shing

CAPITAL

Nominal Share Capital: HK$10,000,000.00 (Divided into 420,563 Ordinary shares and 579,437 Non-voting Deferred shares of HK$10.00 each)

Issued Share Capital: HK$5,795,370.00

SHAREHOLDERS

(As per registry dated 09-01-2011)

Name		No. of shares
		Ordinary	Non-voting Deferred
LO Hoi Yeung, Dennis		1	-
Fairwood B.V.I. Ltd. Craigmuir Chambers, P.O. Box 71, Road Town, Tortola, British Virgin Islands.		9	-
Fairwood Consolidated Investments Ltd. P.O. Box 957, Offshore Incorporations Centre, Road Town, Tortola, British Virgin Islands.		90	-
CHANG Hung Sze, Richard		-	2,500
Pengto International Ltd., Hong Kong.		-	279,357
[to be continued]
[continued]
TSUI Chi Ming		-	1,500
LEE Pui Keung		-	1,500
Atherstone Ltd., Hong Kong.		-	243,750
Abraxas Ltd., Hong Kong.		-	11,500
SHAM Yuen Pang, John		-	4,000
LAM Chi Tak		-	1,500
CHUI Yan Tak		-	1,500
LAU Ming Lee		-	800
HUI Tak Fat		-	1,000
CHEUNG Yuk Lin		-	1,000
CHAN Man Hing		-	800
YEUNG Chung Yiu		-	1,000
NG Hon Sang		-	1,000
LO Hoi Yeung, Dennis			11,500
AU Kwok Choi		-	100
AU Tak Wing		-	75
CHAN Chi Kwong		-	100
CHAN Chi Wai		-	350
CHAN King Keung		-	125
CHAN Man Fai		-	100
CHAN Sai Koh		-	20
CHAN Shu Kan		-	175
CHAN Wai Dick		-	75
CHAN Wai Man		-	155
CHANG Yin Chung		-	100
CHAU Wing Fai		-	75
[to be continued]
[continued]
CHENG Faan Chuen		-	100
CHEUNG Chung Bun		-	75
CHEUNG Hoi Chiu		-	350
CHEUNG Wai Leung		-	150
CHEUNG Wai Ying		-	75
CHEUNG Ying Man		-	20
CHIU Cheong Kwun		-	75
CHIU Kwok Chun		-	100
CHIU Tze Man		-	100
CHO Chi Keung		-	100
CHO Chuen Tak		-	100
CHOI Kin Yeung		-	75
CHOK Chiu Peng		-	100
CHOW Kam Kei		-	480
CHOW Po Wong		-	75
CHU Wai Yi		-	60
CHUI Chi Wah		-	75
CHUI Woon Wah		-	400
CHUNG Pak Lam		-	100
CHUNG Yuk Kam		-	125
FONG Ching Chow		-	400
FUNG Chi Hung		-	300
HO Ming Cheong		-	75
HO Siu Fung		-	500
HO Yat Ming		-	125
HUI Ping Fai		-	100
[to be continued]
[continued]
HUI Wai Man		-	300
KONG Chi Nam		-	75
KONG Yuk Ming		-	400
KWAN Sau Lan		-	35
KWOK Hung Kau		-	75
KWONG Oi Ming		-	75
LAI Moon Chak		-	100
LAI Wai Wan		-	100
LAI Yat Keung		-	100
LAU Ching Ping		-	75
LAU Cho Ming		-	100
LAU Lai Fun		-	20
LAU Wing Sang		-	100
LAU Woon		-	100
LEE Kin Ming		-	100
LEE Sai Wing		-	100
LEE Tak Keung		-	100
LEE Yat Man		-	450
LEI Keng Sam		-	100
LEUNG Chu Lok		-	75
LEUNG Chung Keung		-	100
LEUNG Suet Fung		-	240
LI KIT Wah		-	100
LI Ngan Tsui		-	150
LIN Cheung Kong		-	500
LO Kee Wai		-	500
[to be continued]
[continued]
LO Po Chui		-	20
LUI Kiu Sum		-	75
MAN Hing Kwok		-	75
NG Chi Yee		-	150
NG Kwok Leung		-	75
NG Wai Man		-	75
NG Yui Chi		-	165
OU Wai May		-	35
PANG Sam Mui		-	20
SETO Kuo Kong		-	350
SHUM Chun Ying		-	75
SIT Yau Hung		-	75
SIU Kam Cheong		-	100
SIU Lai Yin		-	100
SUN Yung		-	100
SZETO Siu Cheung		-	125
TAI Kwai Cheung		-	100
TAM Wing Tak		-	75
TO Suk Yin		-	20
TONG Kwok Hung		-	125
TSANG Lai Ha		-	115
TSANG Wai Kuen		-	100
TSE Wai Lap		-	100
WONG Chung Cheong		-	75
WONG Hin Keung		-	75
WONG Hoi Che		-	350
[to be continued]
[continued]
WONG Ka Po		-	100
WONG Kwan Yuk		-	50
WONG Kwok Keung		-	125
WONG Yuen Fun		-	100
YEUNG Chung Shing		-	75
YEUNG Pak Ping		-	300
YING Tze Man		-	1,500
YU Kin Keung		-	50
YU Yuen Leung		-	100
YUEN On Lok		-	75
YUEN Yiu Fai		-	100
YUNG Kin Sau		-	50
		–––	–––––––
	Total:	100 ===	579,437 ======

DIRECTORS

(As per registry dated 09-01-2011)

Name (Nationality)	Address
LO Hoi Yeung, Dennis	Flat B, 11/F., Royal Garden, 27 Repulse Bay Road, Hong Kong.
CHAN Chee Shing	Flat A4, 5/F., Dragon Court, 6 Dragon Terrace, North Point, Hong Kong.
MAK Yee Mei	Flat H, 37/F., Tower 4, The Metropolis, 8 Mau Yip Road, Tseung Kwan O, New Territories, Hong Kong.

SECRETARY

MAK Yee Mei (As per registry dated 24-01-2011)

HISTORY

The subject was incorporated on 9th January, 1981 as a private limited liability company under the Hong Kong Companies Ordinance to take over the former business of Fairwood Café which was established in 1972.

Apart from these, neither material change nor amendment has been ever traced and noted.

OPERATIONS

Activities & Lines: Operator of a chain of fast food restaurants.

Group Employees: Approx. 4,600. (As at 30-09-2011)

Raw Materials: Mainly imports foods and requirements from Europe, etc. and procured locally.

Business Territories: Hong Kong and China.

Group Turnover:-

HK$1,204,863,000 (Year ended 31-03-2007)

HK$1,433,476,000 (Year ended 31-03-2008)

HK$1,465,503,000 (Year ended 31-03-2009)

HK$1,562,348,000 (Year ended 31-03-2010)

HK$1,665,881,000 (Year ended 31-03-2011)

HK$ 811,121,000 (6 months ended 30-09-2010) – Unaudited

HK$ 909,971,000 (6 months ended 30-09-2011) – Unaudited

Terms/Services: COD or as per contracted.

Terms/Buying: Various terms.

GOVERNMENT CONTRACT AWARDED SINCE 1990:

Date	GN No.	Particulars	Amount
27-04-1990	GN1549	Supply of Lunch Boxes to Vietnamese Boat People	Estimated HK$9,344,000

FINANCIAL INFORMATION

Nominal Share Capital: HK$10,000,000.00 (Divided into 420,563 Ordinary shares and 579,437 Non-voting Deferred shares of HK$10.00 each)

Issued Share Capital: HK$5,794,470.00

Indebtedness: HK$37,225,253.63 (Total amount outstanding on all mortgages and charges as per last Annual Return dated 09-01-2011)

Mortgage or Charge (since 2006):-

Date of Equitable Mortgage [Deed]: 30-06-2009

Amount: To secure the Secured Sum and performance of the Borrower’s obligations under this Deed

Property: Subsection 4 of Section C of Tai Po Town Lot No. 1

Mortgagee: The Bank of East Asia Ltd., Hong Kong.

Group Profit Attributable of Equity Shareholders:-

HK$ 84,669,000 (Year ended 31-03-2007)

HK$101,027,000 (Year ended 31-03-2008)

HK$ 80,022,000 (Year ended 31-03-2009)

HK$ 93,269,000 (Year ended 31-03-2010)

HK$123,842,000 (Year ended 31-03-2011)

HK$ 70,710,000 (6 months ended 30-09-2010) – Unaudited

HK$ 58,226,000 (6 months ended 30-09-2011) – Unaudited

Profit or Loss: Making a profit every year.

Condition: Keeping in a satisfactory manner.

Facilities: Making active use of general banking facilities.

Payment: Met trade commitments as required.

Commercial Morality: Satisfactory.

Bankers:-

Standard Chartered Bank (Hong Kong) Ltd., Hong Kong.

The Hongkong & Shanghai Banking Corp. Ltd., Hong Kong.

The Bank of Tokyo-Mitsubishi UFJ Ltd., Hong Kong Branch.

Industrial & Commercial Bank of China (Asia) Ltd., Hong Kong.

The Bank of East Asia Ltd., Hong Kong.

Standing: Fairly good.

GENERAL

Fairwood Fast Food Ltd. is a subsidiary of Fairwood Holdings Ltd. [FHL]. FHL was incorporated in Bermuda on 22nd August, 1991 as the new holding company of the Fairwood Group, pursuant to a corporate reorganization scheme to rationalise the group structure in preparation for a listing of its shares on The Stock Exchange of Hong Kong Ltd. In September 1991, FHL obtained the listing in Hong Kong by offering 97,925,000 new shares to the public of HK$0.10 each at HK$1.18 per share. The net proceeds of the new issue amounted to HK$107.5 million. Dealings in the shares commenced on 9th October, 1991 with Stock Code 52.

The Fairwood Group is principally engaged in operating a chain of fast food restaurants under the name “Fairwood”. These restaurants serve a range of Chinese and western food and are located in Hong Kong, Kowloon and the New Territories, as well as Southern China.

The history of the Group dates back to December 1972 when Mr. Alfred Lo opened the first Fairwood Fast Food restaurant in Chung On Street, Tsuen Wan, New Territories, Hong Kong. The restaurant offered a range of Chinese and western food. The second restaurant was opened in 1977 in Fuk Wing Street, Shamshuipo, Kowloon. Between that time and 1980 a further four restaurants were opened by Mr. Alfred Lo and his brother, Mr. Dennis Lo, all capitalising on the successful format established by the initial restaurants. In 1981, a major restructuring exercise was undertaken to facilities the anticipated rapid expansion of operations.

The subject, owned equally by Mr. Alfred Lo and Mr. Dennis Lo, was established under which their fast food activities were placed. At the same time, it was decided to establish a central food processing facility to maintain close control of food quality and also of costs.

The Group expanded rapidly in the period following 1980, growing from 6 restaurants to a total of 52 at 31st March, 1991 serving over 100,000 customers per day. Over this period, the Group selected a range of locations for its restaurants. In 1987, the Group opened its first restaurant in a Japanese department store which has subsequently been supplemented by a further three outlets in another Japanese department store chain. Similarly in 1987 the Group opened its first restaurant in a housing estate managed by the Hong Kong Housing Authority.

In February 1991, the Group diversified away from fast food with the opening of an Italian restaurant named Mario in Whampoa Garden. Two further Mario restaurants were opened, in Shatin in July 1991 and in Tsimshatsui in September 1991.

In May 1991, the Group took an effective interest of 15% in a PRC joint venture company. In conjunction with the joint venture partners, which include China National Chemicals Import & Export Corporation [SINOCHEM] and Beijing Suburb Tourism Industrial Development Corporation, a Fairwood Fast Food restaurant was opened in Beijing, the PRC in 1992. In relation to the joint venture, the Group provides management services and expertise. During 1993, FHL invested more than HK$300 million to expand its mainland business.

For the year ended 31st March, 2011, the Group recorded turnover of HK$1,665.9 million, up 6.6% against HK$1,562.3 million of previous year. Gross profit margin increased to 14.5% (2010: 13.9%). Profit attributable to equity shareholders was HK$123.8 million as compared with HK$93.3 million of last year, representing a rise of 32.8%. Excluding a gain on disposal of non-current assets held for sale of HK$15.6 million, profit for the year amounted to HK$108.2 million.

The Group’s central food processing plant located at Tai Po Industrial Estate operated seamlessly. It has been supplying food to over 100 stores during the year, bringing great leaps forward to the Group’s overall efficiency. The central food processing plant delivers various benefits, including the streamlining of production processes and significant cost savings. The plant’s level of automation also enables our personnel to focus on other important areas, such as quality control, which has been strengthened during the FY 2011

During the FY 2011, the Group opened 9 new fast food stores including 7 in Hong Kong and 2 in Mainland China.

For the six months ended 30th September, 2011, the Group achieved an increase in turnover of 12.2% to HK$910.0 million, up from HK$811.1 million recorded in the last corresponding period. Gross profit margin reduced by 1.3% to 13.7%. Profit attributable to equity shareholders of the Group was HK$58.2 million, representing a decrease of 17.7% from HK$70.7 million reported for the same period of previous year. If excluding the gain on disposal of non-current assets held for sale, the profit for the period increased by 5.7% from last year’s HK$55.1 million.

During the period of six months ended 30th September, 2011, the Group opened five new fast food stores, including four in Hong Kong and one in Mainland China. As at 30th September, 2011, the Group had a total of 107 stores in operation in Hong Kong, including 100 fast food stores and 7 specialty restaurants. In Mainland China, the Group operated 17 fast food stores as at the end of the reporting period.

The operating environment in Hong Kong is deemed to be challenging in the foreseeable future. While the Group plans to expand its network in Hong Kong, targeting to reach 103 fast food stores by the end of financial year 2011/12, it will primarily focus on driving same store sales growth by delivering appealing menus supported by dynamic marketing campaigns. Through effective branding and product strategies, stringent cost control and management excellence, the Group is optimistic about its ability to sustain growth.

Gauging the current economic trend in Mainland China, the management will continue with its cautious approach targeting 40 stores in operation by the end of financial year 2013/14. Store count is set to increase by 5 to reach 22 by the end of the financial year 2011/12.

At 30th September, 2011, the total number of employees of the Group was approximately 4,600 (31st March, 2011: 4,600).

On the whole, consider the subject good for normal business engagements.

REMARKS

Brief personal profile of the principal directors:-

Mr. Dennis LO Hoi Yeung, aged 59, is the Executive Chairman of FHL. He graduated from the Parsons School of Design with a Bachelor degree in Fine Arts and also attended a course on food and beverage management at New York University. After completion of his studies in the USA in 1977, Mr. Lo returned to Hong Kong and obtained a Master degree in Business Administration. In 1981, Mr. Lo joined the subject. In 1991, he played a major role in the listing of FHL. Mr. Lo was the Managing Director of FHL from 1991 to 1999. He was appointed the Chairman and Chief Executive of FHL in January 2000. On 1st January, 2009, Mr. Lo relinquished his role as Chief Executive but remained as the Executive Chairman of FHL. He is also a director of various subsidiaries of FHL. Mr. Lo is a director of Neblett Investments Ltd.

Mr. CHAN Chee Shing, aged 57, is the Chief Executive Officer of FHL. He received a Bachelor of Arts degree in Economics from the University of Manitoba, Canada in 1977 and a Master of Business Administration degree from the University of East Asia, Macau in 1987. Mr. Chan has over 30 years’ experience in marketing. Prior to joining the Group, he worked as a senior executive for a restaurant group which is listed on The Stock Exchange of Hong Kong Ltd. Mr. Chan joined the Group in 1995. He was appointed a Director of FHL in January 1998 and was appointed Chief Executive Officer of FHL on 1st January, 2009. Mr. Chan is also a director of various subsidiaries of FHL.

Court case:-

Action Date	Case No.	Plaintiff	Defendant	Cause	Amount
Aug. 1990	-	NZA Meat Co. Ltd.	Fairwood Fast Food Ltd.	Damages	Not stated
Apr. 1993	H2937	Welton Ltd.	Fairwood Fast Food Ltd. and other	Injunction	Not stated
May 1997	-	Vescoco Co. Ltd.	Fairwood Fast Food Ltd.	Amount due	HK$288,262
July 1998	-	Hong Kong Yue Square Investment Co. Ltd.	Fairwood Fast Food Ltd.	Landlords and Tenants (Possession)	Not stated
Feb. 1999	H2853	Joylane Ltd. and Spenders Image Ltd.	Fairwood Fast Food Ltd.	Amount due	HK$55,040 HK$717,310
May 2006	H371	Law Ping Ching	Fairwood Fast Food Ltd.	Damages	Not stated

FOREIGN EXCHANGE RATES

Currency	Unit	Indian Rupees
US Dollar	1	Rs.52.78
UK Pound	1	Rs.81.79
Euro	1	Rs.67.46

RATING EXPLANATIONS

RATING		STATUS	PROPOSED CREDIT LINE
>86	Aaa	Possesses an extremely sound financial base with the strongest capability for timely payment of interest and principal sums	Unlimited
71-85	Aa	Possesses adequate working capital. No caution needed for credit transaction. It has above average (strong) capability for payment of interest and principal sums	Large
56-70	A	Financial & operational base are regarded healthy. General unfavourable factors will not cause fatal effect. Satisfactory capability for payment of interest and principal sums	Fairly Large
41-55	Ba	Overall operation is considered normal. Capable to meet normal commitments.	Satisfactory
26-40	B	Capability to overcome financial difficulties seems comparatively below average.	Small
11-25	Ca	Adverse factors are apparent. Repayment of interest and principal sums in default or expected to be in default upon maturity	Limited with full security
<10	C	Absolute credit risk exists. Caution needed to be exercised	Credit not recommended
--	NB	New Business	--

This score serves as a reference to assess SC’s credit risk and to set the amount of credit to be extended. It is calculated from a composite of weighted scores obtained from each of the major sections of this report. The assessed factors and their relative weights (as indicated through %) are as follows:

Financial condition (40%) Ownership background (20%) Payment record (10%)

Credit history (10%) Market trend (10%) Operational size (10%)

PRIVATE & CONFIDENTIAL : This information is provided to you at your request, you having employed MIPL for such purpose. You will use the information as aid only in determining the propriety of giving credit and generally as an aid to your business and for no other purpose. You will hold the information in strict confidence, and shall not reveal it or make it known to the subject persons, firms or corporations or to any other. MIPL does not warrant the correctness of the information as you hold it free of any liability whatsoever. You will be liable to and indemnify MIPL for any loss, damage or expense, occasioned by your breach or non observance of any one, or more of these conditions

This report is issued at your request without any risk and responsibility on the part of MIRA INFORM PRIVATE LIMITED (MIPL) or its officials.